Home » BTp Returns Value February-March 2024: Last Call?

BTp Returns Value February-March 2024: Last Call?

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BTp Returns Value February-March 2024: Last Call?

Independent Financial Advisor and Co-Founder of Affari Miei

February 20, 2024

February 26th will mark the return of the BTp Value with their third issue, before 2024.

We are faced with an initiative that last year attracted great interest among Italian savers and is even now attracting the attention of many who are wondering about the convenience of this new bond.

In this article we want to clarify a fundamental point: without yet knowing (but assuming realistically) the returns, what are our opinions? Is it worth investing?

Is it the right time to approach BTPs or have we missed the opportunity and now, with rates falling, is it too late to focus on these instruments?

This article talks about:

Analysis of Expected Returns for Value BTp

The MEF continues, as usual, to gradually reveal the characteristics of the new BTp dedicated to retail investors.

We know that these BTp will have a duration of six years and will include a 0.7% loyalty bonus for those who hold them until maturity. There is a step-up mechanism for the coupons, meaning that yields will increase over time.

Still, the most awaited detail, the yield, is unknown: it will be revealed on February 23rd.

Based on current data, six-year BTp offer a net yield of around 3% net, equivalent to 3.3%-3.5% gross. It is likely that coupons will start at more conservative values, then grow to potentially hit 4% gross in recent years, although they are unlikely to reach the 3.81% net of October 2023.

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Is it worth investing in BTp Valore?

The convenience to invest depends on several factors. If we compare this issue only to the performance of the last two years, it may seem less attractive due to presumably lower returns.

However, evaluations should be carried out considering different contexts. After the ECB increased interest rates in 2022 to combat inflation, we saw a general increase in the yields of government bonds, a category that includes BTp.

Investors who previously snubbed BTps have started to take an active interest in them since the new issues of 2022, in a year that was not particularly positive for other markets such as the stock market.

Today, with expectations of a decline in interest rates in 2024 and a slowdown in inflation, bond yields have fallen compared to six to eight months ago, and the trend, barring anything unforeseen, is expected to continue.

The BTp Valore, as it is made, is one of the many government bonds that can be subscribed to in this phase: it does not present any “better” characteristics compared to securities of the same maturity from the same issuer as we will see shortly.

Generally we expose ourselves to a single security to have a specific advantage compared to what we already own, something which, to date, cannot be seen on this BTp.

We also talked about it in this video for those who want to learn more:

The MEF Strategy on BTp Valore

These BTPs demonstrate a lesson that we have been reiterating on Affari Miei for years: the issuance of BTPs for retail is a smart move by the MEF which manages to create expectations about something that presents nothing special compared to other opportunities that are practically always available.

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Explained in simple terms for the less experienced: BTPs can be purchased every day on the MOT and, usually, the issues reserved for retail savers offer conditions similar to the returns of the instruments already available.

Of course, the MEF needs to sell new debt to gradually replace the old one but the offer, in itself, does not present who knows what specific convenience for those who sign it when compared with the stock already available.

The same prediction of return that I was talking about just now is based on the returns guaranteed by the securities that can be purchased on the secondary market.

The question arises spontaneously: why is there such a rush to invest in BTPs?

The reasons are similar to those that push us to make Christmas purchases or sales: a collective impulse which, despite predictions and analyses, sees us all involved in the discussion on BTp Valore, including me.

To know more

If you would like to learn more about managing your wealth with a long-term vision, I invite you to explore the resources I have made available below:

Let’s continue with our financial exploration.

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